to be made, but for administrative convenience, it will be made in schedule increases discussed below.

(B) The increase in the employee annuity (see item (1) under "The b H.R. 14563")

To provide an increase equal to exactly 110 percent of the increa the individual would have received under the Social Security Act if I service covered under the Railroad Retirement Act had been emplo ment covered under the Social Security Act, it would be necessary secure information from the Social Security Administration as to t individual's wages (in cases where the individual also had employme and wage credits under the Social Security Act), and this would resu in delays and other complications in the adjudication of the clai The bill would avoid this by treating the individual's average month compensation (on which his annuity is based) as if it were his avera monthly wage under the Social Security Act, and arrive at an approx mation of 110 percent of the dollar amount of the social security pe centage increases as shown in the table below:

DERIVATION OF INCREASES IN TABLE IN SEC. 104(a) OF THE BILL TO AMEND THE RAILROAD

1 The primary insurance amounts and the increases are those for an average monthly wage corresponding to the highes average monthly compensation in the intervals shown with those on the last line being for an average monthly wage of $650

As constructed, the first two columns of the above table are an extension of the table in section 215(a) of the Social Security Act before its amendment in 1967. This extension is achieved by adding 21.4 percent of the average monthly wage in excess of $550 to the primary insurance amount of $168 applicable to the former maximum average monthly wage under the Social Security Act of $550. The formula underlying this table for computing a social security benefit in the Social Security Act before it was amended in 1967 calls for 62.97 percent of the first $110, 22.90 percent of the next $290, and 21.4 percent of the average monthly wage in excess of $400.

The monthly compensation in column I of the table is deemed to be the individual's average monthly wage. The figures above $550 show what his monthly benefit would have been under the Social Security Act as amended in 1965 if the social security wage base had then been increased to the maximum provided by the 1967 Social Security Amendments. The amount determined accordingly is shown in column II. The benefit from the table in section 215(a) of the

Social Security Act as amended in 1967 is shown in column III; and the difference between the amount in column III and the amount in column II is increased by 10 percent to the amount shown in column IV.

Since columns II and III above merely show how the amounts in column IV are arrived at, they are not necessary for the purposes of the bill and are omitted from the table in the proposed section 3(a) (2). The table takes account of the change in formula for increasing benefits under the Social Security Act due to the higher percentages used in fixing the amounts in the 1967 social security table (by taking the difference between the 1967 social security formula amounts in the 1967 table over the amounts in the 1965 table as extended to include an average monthly wage in excess of $550) but would disregard the effect of the raises in social security benefits due solely to the increase in the average monthly wage to amounts in excess of $550. The table in the bill is thus intended to avoid duplication of benefit increases on the basis of earnings in excess of $550 a month because, as stated earlier, the increase in the wage base under the Social Security Act would automatically result in an increase in the monthly compensation limit for the railroad retirement system from the present $550 to $650 a month. Since such increase in the compensation limit would, of itself, produce higher annuity amounts, there would be a duplication of increases derived from the higher earnings (which would be very costly) if the table reflected also the social security increases due to the higher average monthly wage. As so extended, the table includes an average monthly wage up to the new limit ($650 a month), using, throughout the extended portion of the table, the formula applied in deriving the primary insurance amounts from an average monthly wage up to $550 (which, as to an average monthly wage up to $400 only, included the 7 percent social security increase in 1965) and subtracting the primary insurance amount thus determined (see col. II) from the primary insurance amount in the 1967 social security table which is derived by using a formula which includes both the 1965 and 1967 increases in benefits under the Social Security Act (see col. III), and increasing the difference by 10 percent (see col. IV).

(c) The first proviso of the proposed section 3(a)(2)

It is the intent of the bill to make certain that every employee annuitant receives an increase in benefits by an amount in excess of the amount to which he would be entitled under the 1966 amendments to the Railroad Retirement Act, and that in no case shall such increase (before any reduction for early retirement) be less than about $10. The 1966 amendments, as stated earlier, provided (i) for a supplemental annuity, (ii) for a 7-percent increase in benefits based on the first $450 of his average monthly compensation, (iii) that the 7percent increase be not payable to anyone entitled to a supplemental annuity (unless the supplemental annuity is reduced by reason of a

Thus, the $100 monthly compensation, if it were the individual's average monthly wage, would, under the 1965 table, produce a primary insurance amount (the amount of the employee's benefit, except where there is a reduction for age) of $63.20, and under the 1967 social security formula, $71.50, an increase of $8.30 which, when increased by 10 percent, becomes $9.13; and this is the amount by which the annuity would be increased, subject, of course, to any offsets for the increases in his social security benefit. Similarly, if the individual's monthly compensation of $650 were his average monthly wage, his primary insurance amount under the 1965 table, as extended (as above stated), would be $189.40, and under the 1967 social security formula, would be $218, an increase of $28.60; and 110 percent of $28.60 equals $31.46, which is the amount by which the individual's annuity would be increased, subject, also, to any offsets for the increase in his social security benefits. (See (C) and (D) below for explanation of offsets.) However, note that in every case there will be a minimum increase in the employee's annuity, before any reduction for early retirement and after any offsets, of $10. (See (E) below for explanation of minimum increase of $10.)

supplemental pension to an amount less than the 7-percent increase, in which case the difference is paid) and (iv) that the 7-percent increase be offset by the amount of the 1965 increase in any social security benefits to which the individual is entitled. The amount computed under section 3(a)(1) plus the increase computed under that part of section 3(a) (2) which precedes the provisos in that section includes the 7-percent increase of 1966 even though the individual is not entitled to that increase by virtue of his entitlement to a supplemental annuity. Therefore, this first proviso of section 3(a) (2) adjusts the increase calculated under that section to take away the 7-percent increase or that part thereof to which the individual, being paid a supplemental annuity, is not entitled."

(D) The second proviso in the proposed section 3(a) (2)

As stated earlier, the 1966 amendments to the Railroad Retirement Act, which provided for an increase in annuities by 7 percent, provided that such increase of an individual's annuity be reduced by the 7 percent increase in benefits to which the same individual is entitled under the 1965 amendments to the Social Security Act. Thus, under present law, if an individual's regular annuity of, say, $150 is increased by 7 percent to $160.50, and the same individual is entitled to a monthly social security benefit of $107 ($100 plus $7 as a result of the 1965 amendments to the Social Security Act), the $10.50 increase in his annuity is reduced by the $7 increase he received under the Social Security Act to $3.50, resulting in an annuity of $153.50. This reduction in his annuity for the 1965 increase in social security benefits is now achieved by multiplying his increased social security benefit of $107 by 6.55 percent ($107 times 6.55 equals approximately $7). The second proviso of the new section 3(a) (2), however, would require that the reduction for 1965 as well as for the 1967 increases in his social security benefits be made from the amount calculated under paragraph (2) of the new section 3(a). Since the amount calculated under the new section 3(a)(1) and that part of the new section 3(a) (2) which precedes the provisos, would include both the 7 percent increase effected in 1966, and the increase provided by the table in paragraph (2), without any reduction of such amount by the increases in his social security benefits effected in 1965 and 1967, the amount thus calculated must be reduced for both of such increases.

• For example, if the individual is entitled to a regular annuity of $150 a month under the Railroad Retirement Act as amended in 1966 and to a supplemental annuity of $70 a month, his regular annuity is not increased from $150 by 7 percent (by $10.50 to $160.50) as it would if he were not entitled to a supplemental annuity; his annuity would be computed under the new section 3(a) (1) which already includes the 7 percent increase effected by the 1966 amendments, and under that part of section 3(a) (2) which precedes this proviso. Thus, the amount computed under the new section 3(a) (1) would be $160.50 (because such formula already includes the 7 percent increase). To this amount (assuming the individual's monthly compensation is in the $151 to $200 bracket of the table in section 3(a) (2), would be added $12.87 (see col. IV of the table), making a total of $173.37. Since the individual is also entitled to a supplemental annuity, the first proviso requires that the $12.87 increase in his case be reduced by 6.55 percent of $160.50 (the amount computed under the first paragraph of the new sec. 3(a)), or by $10.50 ($160.50 x 6.55 percent equals $10.50) to $2.37 which when added to $160.50 (the amount computed under para. (1) of sec. 3(a)) provides an annuity of $162.87. This is, of course, the same as the amount of his regular annuity of $150, payable before the enactment of this bill, plus an increase of $12.87.

• Thus, in a case like that in the example given in note 5 above (except that the individual is also entitled to a supplemental annuity), the increase of $12.87 would be subject to a reduction of $10.50 under the first proviso, and of $13.91 ($121-the new 1967 social security benefit-times 11.5 percent) under the second proviso. Since $24.41 ($10.50 plus $13.91) wipes out the $12.87 increase-under the new section 3(a)(2), the amount calculated under the new section 3(a) (1), of $160.50, would remain payable. This gives an increase of $10.50 over the amount of $150 payable under present law.

If, however, the individual is not entitled to a supplemental annuity, and is entitled to a social security benefit, there would be no reduction by the first proviso to account for the 1966 increase of 7 percent.7 (E) The third proviso of the proposed section 3(a)(2)

The third proviso of the new section 3(a) (2) is intended to make certain that after all the other computations provided for in section 3(a)(1) and (2), the increase (before any reduction for early retirement) would be about $10 above the amount to which the individual would be entitled under the 1966 amendments to the Railroad Retirement Act. Thus, if the amount calculated under the new section 3(a) (1) and that part of the new section 3(a) (2) which precedes the third proviso does not, in effect, exceed by $10 or more the amount calculated under the 1966 law, the third proviso of the new section 3(a)(2) would apply. In such a case, there would be added to the amount computed under the new section 3(a)(1), which includes the 7 percent increase of 1966, $10, minus 6.55 percent of that part of the amount calculated under the new section 3(a)(1) based on the first $450 of monthly compensation if he is entitled to a supplemental annuity (this would, in effect, take away from the $10 the 7 percent increase to which he is not entitled under the 1966 amendments to the Railroad Retirement Act, but which is included in the computation under the new section 3(a)(1)). However, the third proviso of the new section 3(a)(2) would seldom apply where the individual is entitled to a supplemental annuity but not to social security benefits because the increase under the other provisions would ordinarily be in excess of $10.8

Thus, in a case like that in the example given in note 6 above (except that the individual is not entitled to a supplemental annuity), the 7 percent ($10.50) increase provided by section 3(a) (1) and the $12.87 increase provided by that part of section 3(a) (2) which precedes the provisos, would have to be reduced for both the 1965 and 1967 increases in the individual's social security benefit. This reduction would be by 5.8 percent for the 7 percent social security increase in 1965 (5.8 percent of a social security benefit as increased by 13 percent is approximately the same as 6.55 percent of the benefit before such increase; thus, $107 times 6.55 percent equals approximately $7; $107 plus 13 percent thereof equals approximately $121; and 5.8 pereent of $121 equals approximately $7), and by 11.5 percent for the 13 percent social security increase in 1967 (11.5 percent of his new social security benefit of $121 (see above) equals approximately $13.91, making a total of ($7 plus $13.91) or about $121), or by a total of 17.3 percent of his increased social security benefit. The social security benefit of $121 multiplied by 17.3 percent gives an amount of approximately $20.93. Since the $20.93 wipes out the $12.87 increase, the amount calculated under the new section 3(a)(1) would be payable (that amount is $160.50, which exceeds by $7 the amount of $153.50 payable under present law the amount of $150 payable before the 1966 amendments was increased by those amendments to $160.50 and reduced under the same amendments by the $7 he received as a 1965 increase in the social security benefit to $153.50)).

This amount of $160.50, however, would be increased by $3 under the third proviso of the new section 3a)(2) which provides a minimum increase of $10 (see (E) below for an explanation of such third proviso). For another example, assume that the annuity of an individual who is not entitled to a supplemental annuity, is $170 after the 7 percent increase in 1966 but before any reduction for the 1965 increase in his social security benefits; he is actually being paid $163.06 because the $170 had to be reduced by 6.55 percent of his social security benefit which, in his case, is $106, or by $6.94 (approximately the amount of the increase by percent in 1965). The amount calculated under the new section 3(a) (1) would treat him as if he was paid the full amount of $170, which, when increased (assuming that his monthly compensation is in the $201$250 bracket of the table in section 3(a)(2)) by $14.63 would be $184.63. Since this amount would include the $6.94 which had already been deducted under the 1966 amendments to the Railroad Retirement Act, it would be without any reduction by the second proviso in the new section 3 (a) (2) for the 1965 and 1967 inreases in social security benefits. Therefore, under the second proviso of the new section 3 (a) (2), the increase of $14.63 would be reduced by 17.3 percent of his social security benefit as increased by 13 percent in 1967 to $119.80 ($106 plus $13.80), or by $20.72. Since $20.72 is greater than the $14,63 increase, there would be no increase in the amount of $170 calculated under the new section 3 (a) (1). The amount of $170 exceeds the amount of $163.06, payable under the present law, by less than $10; therefore, the third proviso would apply to increase the annuity to $173.06, which is $10 above the amount payable under present law (see (E) below for the minimum increase of about $10).

For example, the individual's annuity under the 1966 amendments to the Railroad Retirement Act is $150, and he is not entitled to social security benefits. This does not include the 1966 increase of 7 percent which is not payable because of his rights to a supplemental annuity; but the amount calculated under the formula in the new section 3(a) (1), which includes the 1966 increase of 7 percent, would be $160.50 ($150 plus 7 percent thereof, or $10.50). That part of the new section 3(a) (2) which precedes the provisos would add (assuming a monthly compensation in the $151-$200 bracket of the table in section 3(a) (2)) $12.87, producing a total of $173.37. The first proviso of the new section 3(a) (2) would reduce the $12.87 by 6.55 percent of $160.50, by $10.51, leaving $2.36 to be added to $160.50, producing $162.86. This would be the amount payable under the bill and is more than $10 in excess of the amount of $150 payable under the 1966 amendments to the Railroad Retirement Act. In this example, the third proviso of the new section 3 (a) (2) would have no effect.

If the individual is entitled to a social security benefit but not to a supplemental annuity, and his annuity as computed under the new section 3(a) (1) and that part of the new section 3 (a) (2) which precedes the third proviso does not, in effect, exceed the amount to which he would be entitled under the 1966 law by about $10, the third proviso of the new section 3(a) (2) would apply. In such a case, the amount calculated under the new section 3(a)(1) would be increased by $10 minus 5.8 per centum of (i) his social security benefit, or (ii) the amount computed under the new section 3(a) (1), whichever would produce the smaller reduction. This would take away from the $10 (where the 5.8 per centum is taken of his social security benefit), the amount of the reduction for social security benefits required under the 1966 amendments to the Railroad Retirement Act, and, by limiting this reduction to 5.8 per centum of the amount computed under the new section 3(a)(1), avoids taking away more than an amount equal to the 7 percent increase of 1966.

9

If the individual is entitled to both a supplemental annuity and a social security benefit, the third proviso of the new section 3(a)(2) would apply in the same manner as if he were not entitled to the social security benefit. This is so because the supplemental annuity would preclude entitlement to the 7 percent 1966 increase in annuities, and the third proviso guarantees that the 1967 increase in annuities would be by about $10.

INCREASES IN ANNUITIES TO SPOUSES AND SURVIVORS OF AN EMPLOYEE

Annuities to spouses and survivors of an employee would be increased in a way similar to that provided for increasing employee annuities, except that the minimum increase above the amount payable under the 1966 amendments to the Railroad Retirement Act would be about $5 a month instead of about $10, and except that the spouse's annuity would not be increased over the maximum amount provided in section 2(e) of the Railroad Retirement Act.

OTHER AMENDMENTS PROPOSED IN TITLE I OF THE BILL

In addition to the increase in annuities, title I of the bill would provide reduced annuities for disabled widows and widowers who have attained age 50 on roughly the same conditions as monthly benefits would be provided for totally disabled widows and widowers covered under the Social Security Amendments of 1967; except that there would be no waiting period after disability occurs before an annuity could be paid. The reduction would be by three-tenths of 1 percent for each month the individual is under age 60 when the annuity begins.

For example, the individual's annuity under the 1966 amendments to the Railroad Retirement Act is $170 reduced by $6.94 (6.55 percent of his social security benefit of $106) to $163.06. The amount computed under the new sec. 3(a) (1) would be $170, and that part of the new sec. 3(a)(2) which precedes the provisos would add (assuming a monthly compensation in the $201-$250 bracket of the table in sec. 3(a)(2)) $14.63, producing a total of $184.63. By deducting from $14.63 an amount derived by taking 17.3 percent of his 1967 social security benefit of $119.80 (produced by increasing his social security benefit of $106 by 13 percent) or $20.72 (through the application of the second proviso of the new sec. 3(a)(2)), there would be no increase by that part of the new sec. 3(a) (2) before the third proviso. Therefore, the third proviso would apply in this manner: 5.8 percent of his social security benefit as raised in 1967 (which is $119.80) would produce $6.95; while 5.8 percent of the amount calculated under the new sec. 3(a) (1) would produce $9.86. Since $6.95 is the smaller reduction, the $10 would be reduced by $6.95, leaving $3.05, which, when added to the amount computed under the new sec. 3(a)(1) of $170, would produce $173.05. This would be the amount payable under the bill and exceeds $163.06 the amount payable under the 1966 amendments to the Railroad Retirement Act, by about $10. The rounding provisions of the Railroad Retirement Act have been ignored in this and all other examples shown in this report.